Shanghai Electric v Reliance Infra: Delhi High Court restrains Anil Ambani firm from selling assets worth US $135 million

The Delhi High Court on Wednesday restrained Anil Ambani-owned Reliance Infrastructure from selling, alienating, transferring or encumbering its assets amounting to US $135 million so that the same can be kept as security for its arbitration dispute with Chinese company, Shanghai Electric Group [Shanghai Electric Group Co Ltd v Reliance Infrastructure Ltd]..The Court passed the order on an appeal filed by Shanghai Electric against a single-judge's 2022 order rejecting its plea for interim relief to secure the amount in an arbitration dispute (approximately ₹1,100 Crores) that was allegedly due and payable to Shanghai by Reliance Infrastructure..“Respondent Reliance Infrastructure Ltd. is restrained from selling, alienating, transferring or encumbering its assets, amounting to US$ 135,320,728.42. Though the awarded amount along with interest and costs works out to more than the above amount, however the order is restricted to the amount prayed for in the Petition under Section 9 of the Arbitration Act,” the High Court ordered today..The division bench of Justices Sanjeev Sachdeva and Manoj Jain also clarified that its restraining order would be subject to any charge on the assets already created in favour of a bank or a financial institution.“It is clarified that this restraint would be subject to any charge on the assets already created in favour of a Bank or a Financial Institution. In case of sale of an already encumbered asset by a Bank or Financial Institution, the balance, if any left, after satisfaction of the charge shall be kept in a designated account and shall not be utilized by the Respondent for any purpose and shall be subject to the outcome of the Enforcement Petition filed by the Appellant," the judgment stated. .Shanghai Electric and Reliance Infrastructure have been involved in a legal dispute concerning the Sasan Power Project.On January 31, 2024 the Singapore International Commercial Court (SICC) upheld an arbitral award directing Reliance Infrastructure to pay around $146 million in dues and damages to Shanghai Electric Group..Today, the Delhi High Court rejected Reliance's contention that Shanghai Electric’s plea for security has become infructuous since the arbitral award has been rendered.“Section 9, of the Arbitration Act permits a Party apply to a court for interim measures before, during or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Arbitration Act. By virtue of proviso to Section 2(2) of the Arbitration Act, Section 9 applies to International Commercial Arbitration. Thus, any party can apply to a Court for interim measures before, during or after the making of the arbitral award,” the High Court held..It further said that since Section 36 (concerning enforcement of domestic arbitral awards) of the Arbitration Act is not applicable to foreign awards, the outer limit provided by Section 9 of the Arbitration Act of before it is enforced in accordance with Section 36, would not be applicable either. “Thus it is held that the outer limit for seeking interim measures under Section 9 of the Arbitration Act would not become applicable on mere filing of the Application seeking enforcement. There is thus no merit in the said argument raised on behalf of the Respondent, the same is accordingly rejected," the Court said. .Therefore, the division bench set aside the single-judge order and allowed the appeal by Shanghai Electric..Senior Advocates Rajiv Nayar and Dayan Krishnan along with advocates Ketan Gaur, Aayush Mitruka, Abhinav Srivastava, Pragya Prakash and Presksha Gupta appeared for Shanghai Electric.Senior Advocates Sandeep Sethi and Parag Tripathi along with advocates Vijayendra Pratap Singh, Aditya Ganju, Aditya Vikram Jalan, Asif Ahmed, Shruti Garg, Akash Ray, Shreya Choudhary and Arjit Oswal represented Reliance Infrastructure..[Read Judgment]